IFO index rises again
“Concerns from German companies are easing, but…”
04/24/2023 11:53 am
The bleak prospects of a recession in the German economy are fading in the spring as output increases and increasing energy security. However, experts do not want to fuel overly high expectations of the economy.
The mood in the German economy improved in April for the sixth month in a row. The barometer for the business climate climbed to 93.6 points from 93.2 points in March, as the Munich IFO Institute announced in its survey of top managers. The mood is better than it has been since the outbreak of the Ukraine war in February 2022. Economists polled by Reuters had expected an increase to 94.0 points.
“The concerns of German companies are easing, but the economy is lacking in dynamism,” said IFO President Clemens Fuest. Managers assessed their situation somewhat more skeptically than recently, but their business prospects are better. The German economy had shrunk by 0.4 percent at the end of 2022, also because of the energy crisis. There were therefore concerns that the economy would also shrink at the beginning of 2023 and that Germany would slide into a recession in the winter months.
“Mood keeps thawing”
Despite persistently high inflation, most experts are now more optimistic about the economy. Economists assume that the gross domestic product (GDP) in the first quarter is likely to have increased by 0.2 percent. The data on this will be published on Friday. Reuters recently learned from insiders that Economics Minister Robert Habeck has doubled the federal government’s growth forecast for 2023 to 0.4 percent.
“The start of the spring quarter has been successful in economic terms: After the initially enormous concerns about energy security, the mood in companies is thawing more and more with the now well-survived winter,” said KFW chief economist Fritzi Köhler-Geib. However, she warned against expectations that were too high: “Monetary policy will only unfold its full braking effect this year and the losses in purchasing power suffered by private households will probably reverberate for some time to come. The economy may be able to avoid a contraction in 2023 as a whole, but it would also come with more favorable development presumably little beyond stagnation.”
Around 9,000 companies answer questions from the IFO Institute every month for the business climate index. They are asked to assess their current business situation and their expectations for the next six months.